CRM Property Management Practices 3 — Questions and Answers
Question 1: A tenant complains that the heating system has failed in January. Under the implied warranty of habitability, the manager must:
- Wait until the next scheduled maintenance cycle
- Repair the heating within a reasonable and prompt timeframe (Correct answer)
- Offer the tenant a rent reduction instead of repair
- Ask the tenant to use space heaters at their own expense
Correct answer: Repair the heating within a reasonable and prompt timeframe
The implied warranty of habitability requires landlords to maintain essential services like heat, and repairs must be made promptly.
Question 2: What is constructive eviction?
- A court-ordered eviction carried out by the sheriff
- When a landlord's failure to maintain habitability forces a tenant to vacate (Correct answer)
- An eviction that occurs when a tenant abandons the property
- A mutual agreement to terminate the lease early
Correct answer: When a landlord's failure to maintain habitability forces a tenant to vacate
Constructive eviction occurs when uninhabitable conditions created or allowed by the landlord force the tenant to leave.
Question 3: A residential property manager is comparing two vendor bids for landscaping. Bid A is lower cost but the vendor has mixed reviews. Bid B is higher cost with excellent references. What is the best approach?
- Always choose the lowest bid to minimize expenses
- Always choose the highest bid for best quality
- Evaluate total value including cost, quality, and references before deciding (Correct answer)
- Let the tenants vote on which vendor to use
Correct answer: Evaluate total value including cost, quality, and references before deciding
Effective vendor selection balances cost with quality, reliability, and references to achieve the best overall value.
Question 4: Which type of insurance protects a property owner against loss of rental income when a property becomes uninhabitable due to a covered peril?
- General liability insurance
- Umbrella insurance
- Loss of rents (rent loss) insurance (Correct answer)
- Workers' compensation insurance
Correct answer: Loss of rents (rent loss) insurance
Loss of rents insurance (also called business interruption insurance) replaces rental income when a property cannot be rented due to a covered loss.
Question 5: What is the purpose of a pro forma statement in residential property management?
- To document tenant complaints
- To project future income and expenses for a property (Correct answer)
- To report current maintenance issues to the owner
- To record all lease signings for the year
Correct answer: To project future income and expenses for a property
A pro forma statement is a projected financial statement used to forecast a property's income and expenses over a future period.
Question 6: A tenant installs a satellite dish on the exterior of their apartment without permission. Under FCC rules, the manager may:
- Immediately remove the dish and charge the tenant
- Prohibit the dish entirely under all circumstances
- Regulate placement to protect safety and aesthetics but cannot ban it outright (Correct answer)
- Fine the tenant $500 per day it remains
Correct answer: Regulate placement to protect safety and aesthetics but cannot ban it outright
The FCC's OTARD rule allows tenants to install satellite dishes but permits landlords to impose reasonable restrictions on placement for safety and aesthetics.
Question 7: Which of the following best describes the 'net operating income' (NOI) of a property?
- Gross income minus mortgage payments
- Gross income minus all operating expenses, before debt service (Correct answer)
- Net profit after taxes and depreciation
- Total rental collections for the month
Correct answer: Gross income minus all operating expenses, before debt service
NOI is calculated by subtracting all operating expenses from gross income, before accounting for mortgage payments or debt service.
CRM Property Management Practices 3
A tenant complains that the heating system has failed in January.
Under the implied warranty of habitability, the manager must: